The markets have had two worries about the American bank bailout plan in the past few days: will it happen and will it work? It is now clear that it will happen, or at least that something resembling it will happen. But there are increasing doubts about whether it will work and unfreeze the credit markets.

Your view on whether it will work depends partly on your view on what the problem is. If you think that the problem is the lack of buyers for US mortgage-backed securities, then the plan has a good chance of working. If you think that is only a symptom of the underlying disease, it may be less effective.

If you think that the fundamental problem is that many of the world's banks do not have enough capital, then there are probably better ways of addressing it.

Rather than bolstering balance sheets indirectly by taking toxic assets off banks' books for more than their written-down value, maybe the US taxpayer should do it directly by putting in money in return for some sort of equity.

Maybe the Government should do what Warren Buffett has done at Goldman Sachs - put money in at a steep rate of interest with little risk and get warrants to buy shares at a low price to get the benefit of the upside.

Although this would arguably be more effective than what is proposed, it is easy to see why it would be less attractive to the US authorities, and to the banks themselves. It would certainly be less attractive to British banks.

The appeal of the current plan is that British banks with large operations in the US are expected to be allowed to offer their toxic assets for sale.

The top five high street banks have an estimated $175 billion of eligible assets.

If British banks sold assets for more than their values in the books, their balance sheets would be bolstered courtesy of the US taxpayer. Thanks very much. But it would hardly do for British bank balance sheets to be bolstered in return for the US Government taking stakes.

British banks with holdings of toxic assets should benefit indirectly, even if they decide not to use the scheme or are not allowed to. The sales of assets to the US Government should put some sort of floor under the whole mortgage-backed securities market.

No wonder Hank Paulson, the US Treasury Secretary, has been urging other countries to introduce similar schemes to share the burden. There have been no volunteers so far.

None has been quite so dismissive as Peer Steinbrück, the German Finance Minister, who yesterday said it would not be wise or necessary for the German Government to do anything similar for its banks. He blamed the crisis largely on the Anglo-Saxon drive for profits and lax regulation in America.

This is pretty rich, given the number of German banks that have had to be bailed out because they bought US sub-prime-related securities.

Downing Street has so far insisted that there is no plan for a US-style bailout here. Alistair Darling, the Chancellor, has been looking at ways to revive the mortgage-backed securities market, including the possibility of the Government guaranteeing new high-quality securities.

The idea has been criticised by Mervyn King, the Bank of England Governor, who would be even more opposed to direct government purchases of existing securities. Mr King has said that UK banks are still under-capitalised and is worried that this will act as a drag on the economy.

If the Government does not follow the US lead, it should look at other ways to ensure banks sort out their balance sheets.

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